By Mark Baldassare, President and Chief Executive Officer, Public Policy Institute of California

Testimony to the Little Hoover Commission, California’s Crucial Issues—Ongoing Concerns and "The New Normal,” September 25, 2012

Our researchers regularly provide expert testimony to policymakers. When possible, we make it available on our website.

Thank you for the opportunity to participate in a public hearing on California’s Future. The research and publications of the Public Policy Institute of California (PPIC) have for many years pointed to the importance of planning for a better future even as we attempt to deal with today’s fiscal and economic challenges. The institute is busy this year raising awareness among the state’s policymakers, through our events and outreach, of the critical need to make informed policy choices about the state’s long-term challenges.

The source of most of my comments today is the PPIC briefing kit, California 2025: Planning for a Better Future. We produced the 2012 briefing kit to inform policymakers of our key findings and policy recommendations in 10 issue areas. My remarks will focus on three areas—the workforce, water, and climate change—and in so doing will refer to the work of PPIC colleagues Ellen Hanak and Hans Johnson.

I chose to highlight these three issues because they each reflect trends that are threatening the state’s economy and the wellbeing of Californians. But these threats also present opportunities for state policymakers to work together to forge a new vision for California. And because the state’s policymakers include the voting public as well as government officials, I will also discuss the PPIC Statewide Surveys that I am directing since the results have relevance for our abilities to make policies for a better future.

First, the education system is failing to keep up with the changing workforce demands of the state’s economy. Too many of our K-12 public school students are not completing high school or they are graduating high school without enough preparation for success at college-level work. California—which built the most admired public higher education system in the country guided by an ambitious master plan over 50 years ago—also lags other states in the production of college graduates. This is happening at a time when fundamental changes across industries, the growth of the service economy, and globalization require greater numbers of highly educated workers. Moreover, the baby boom cohort—a relatively well-educated one—is being replaced by demographic groups with historically low rates of college completion. Projections suggest that, if current trends continue, the state economy will require 1 million more college graduates in 2025 than the state is producing. And there will not be enough newcomers to California from other states and countries to close this workforce skills gap. If we fail to change this trend the result is likely to be a less productive economy and less tax revenue for the state. Our studies have also found that rates of employment have been much higher for college graduates than others in the wake of the Great Recession, and as a result, stubbornly high unemployment rates and high demands for public services may be among the future byproducts of a workforce skills gap.

California is also facing challenges in managing its natural resources. Managing water has always been difficult given the weather patterns that bring long droughts and severe floods, and the variability in water availability and demands across the state’s regions. After all, this is a state where much of the state’s population relies on water brought in from distant rivers or Sierra Nevada watersheds. Population growth is likely to increase water demand in urban areas, and the physical and biological fragility of the water system’s hub in the Sacramento-San Joaquin Delta compound the challenges. The Delta poses serious risks to the economies of the Bay Area, Southern California, and San Joaquin Valley. With the Delta’s physical deterioration, the state faces inevitable, fundamental changes in this region.

Climate change is expected to amplify our water problems and poses other threats throughout the state. Higher temperatures will result in more rain and less water from the Sierra snowpack. The frequency of extreme events such as heat waves, wildfires, floods, and droughts are expected to increase and will have consequences for public health and public safety. Sea levels are expected to rise and that will have impacts on coastal homes, habitats, and infrastructure. Even if global emissions of greenhouse gases are reduced, and that is by no means a certainty, we will still need to make plans to accommodate for the impacts on air, land, and water of climate changes now in process in California.

As difficult as these three challenges are, we also know that we can meet them if there is political will. Californians have solved problems in the past by making investments and hard policy choices, and planning for a better future in ways that benefit our economy and improve our quality of life today.

In education, for example, our work at PPIC has demonstrated that modest investments in our public higher education system can yield significant results. Only about one in 10 community college students, and one in four of those taking transfer-eligible courses, transfer to a four-year university. Only about half of California State University students graduate within six years as entering freshmen, compared to four of every five students in the University of California system. Gradually increasing college enrollment rates, community college transfer rates, and graduation rates could, together, reduce the workforce skills gap by half in 2025. This will not be a tough sell for state residents: The PPIC Statewide Survey in November 2011 found that 86 percent of Californians believe that it is very important for K-12 public schools to prepare students for college, 73 percent say it is very important for community colleges to prepare students for four-year universities, and 73 percent believe that California’s higher education system is very important to the quality of life and economic vitality of the state over the next 20 years.

In water management, the state has the tools to secure a safe, reliable water supply while improving conditions for fish and wildlife. With careful management and complementary ecosystem investments, a peripheral canal or tunnel has the best potential for safeguarding the Delta’s environment while maintaining water supply reliability. Better pricing policies—such as tiered water rates with higher prices for greater uses—can heighten incentives to conserve water. Recycled wastewater has potential for meeting new demands. Water marketing can also play an important role in increasing efficiency. Storing water underground can also be a cost-effective way to save it for dry years. Californians perceive that there is a water problem in search of a solution: The PPIC Statewide Survey in March 2012 found that 61 percent of Californians say that the supply of water is a problem in their part of the state, and in December 2009 we reported that just 32 percent believe that the water supply available for their part of California will be adequate for what is needed 10 years from now.

In climate change, California has been a leader in implementing policies to curb greenhouse gas emissions. California passed the first-ever greenhouse gas emission standards for passenger vehicles in 2004, the comprehensive effort to reduce emissions with the Global Warming Solutions Act in 2007, and Senate Bill 375 aimed at reducing driving through local land use and transportation planning in 2008. The state’s climate change laws are not without controversy or costs—however, they are efforts that the state’s residents have steadfastly supported even through the Great Recession. The PPIC Statewide Survey in July 2012 found that 78 percent of Californians favor requiring all automakers to reduce greenhouse gases from new cars, 71 percent favor the state law that requires California to reduce its greenhouse gas emissions down to 1990 levels by 2020, and 77 percent favor encouraging local governments to change land use and transportation planning so that people could drive less. While 75 percent say that global warming is a serious threat to the economy and quality of life for California’s future, just 25 percent believe that doing things to reduce global warming will result in fewer jobs.

Government officials will need to find ways to tap into the public’s concerns about the effects of trends in the workforce, water, and climate change—and their general enthusiasm for planning for a better future. Citizen engagement will be essential because our state’s policymakers include the voting public who will be called upon often to make decisions in statewide elections about taxes, bonds, and laws.

This raises the most difficult challenge for the state’s future: Californians deeply distrust state government. While voters are deeply divided along partisan lines on many issues, California voters are united in their dissatisfaction with the state of the state and its governance. Our November 2011 survey found that 56 percent of likely voters say they have very little or no confidence in the state government’s ability to plan for the future of higher education. Our March 2012 survey found that only 51 percent support the state water bond that the governor and legislature had passed in 2010 and since removed from the November ballot over fears of its defeat. And our July 2012 survey found that when likely voters are told that state efforts to reduce greenhouse gases include a cap-and-trade system that will generate about $1 billion in new revenues, 67 percent express very little or no confidence that the state government would use this money wisely. In sum, many Californians may just say no when asked to support public investments for a better future.

There is no simple way to rebuild the civic contract. We need to engage more citizens in elections, give those who do participate a better grasp of the basic facts around the issues they are deciding, and increase the amount of information about the pros and cons of ballot measures. This effort will require a sustained campaign led by a broad range of leaders across the state in business, labor, education, civic, philanthropic, and nonprofit organizations to succeed. This activity should also spark a state dialogue: What kind of government do we need and what are the citizens’ obligations in achieving this vision?

While the task of restoring trust in government is not easy, there is reason to be hopeful. Californians are in a mood for change rather than being resigned to cynicism and pessimism. They approved the majority legislative vote for passing a state budget and that has resulted in two on-time budgets. They approved two electoral reforms—an open primary and independently drawn districts—that premiered in June. In that election, voters approved another reform, affecting the term limits law for state legislators. The November ballot will include more chances to reform the fiscal and governance structure. It will take time to see how the reform spirit will play out and if the changes will satisfy a distrustful electorate. But California has long been on the cutting edge of change. If leaders across all sectors team up with residents committed to change these troubling trends, we can build a better future for all Californians.